### 6A

- i 

## APPENDIX 6A. DATA FOR EQUIPMENT PRICE MARKUPS

TABLE OF CONTENTS

6A.1 INTRODUCTION ........................................................................................................ 6A-1

6A.2 DETAILED WHOLESALER COST DATA ............................................................... 6A-1

6A.3 DETAILED MECHANICAL CONTRACTOR DATA ............................................... 6A-2

6A.4 ESTIMATION OF WHOLESALER AND MECHANICAL CONTRACTOR

MARKUP STANDARD DEVIATIONS ..................................................................... 6A-2

LIST OF TABLES

Table 6A.2.1 Disaggregated Costs and Expenses for Wholesalers* ........................................ 6A-1

Table 6A.4.1 Mechanical Contractor Expenses and Markups Used To Scale the Incremental

Markups* .......................................................................................................... 6A-2

Table 6A.4.2 Mechanical Contractor Baseline Markups by State, 2007* ................................ 6A-3

### 6A

- 1 

## APPENDIX 6A. DATA FOR EQUIPMENT PRICE MARKUPS

6A.1 INTRODUCTION

This appendix provides further details on information presented in chapter 6, Markups for

Equipment Price Determination.

6A.2 DETAILED WHOLESALER COST DATA

Chapter 6 presents w holesaler revenues and costs i n aggregated form, based on the

Heating

, Air conditioning & Refrigeration Distributors International (HARDI) 201 0 Profit

Report (2009 Data)

. Table 6A.2.1 provides the complete breakdown of costs and expenses from

the 2010 Profit Report (2009 Data)

. The column labeled “Scaling” indicates which expenses

were assumed to scale with only the baseline markup and which were assumed to scale with both

the baseline and the incremental markups. As described in chapter 6, only those expenses that

scale with baseline and incremental costs are m arked up when there is an incremental change in

equipment costs.

Table 6A.2.1 Disaggregated Costs and Expenses for Wholesalers*

Item Percent of Revenue Scaling

Cost of Goods Sold 73.4%

Gross Margin 26.6%

Payroll Expenses 16.1% Baseline

Executive Salaries & Bonuses 1.7%

Branch Manager Salaries and Commissions 1.4%

Sales Executive Salaries & Commissions 0.5%

Outside Sales Salaries & Commissions 2.2%

Inside/Counter Sales/Wages 2.9%

Purchasing Salaries/Wages 0.5%

Credit Salaries/Wages 0.2%

IT Salaries/Wages 0.2%

Warehouse Salaries/Wages 1.5%

Accounting 0.5%

Delivery Salaries/Wages 0.9%

All Other Salaries/Wages & Bonuses 0.9%

Payroll Taxes 1.1%

Group Insurance 1.2%

Benefit Plans 0.4%

Occupancy Expenses 3.8% Baseline

Utilities: Heat, Light, Power, Water 0.4%

Telephone 0.3%

Building Repairs & Maintenance 0.2%

Rent or Ownership in Real Estate 2.9%

Other Operating Expenses 5.4% Baseline & Incremental

Advertising & Promotion 0.7%

Insurance (business liability & casualty) 0.2%

Depreciation 0.4%

Vehicle Expenses 1.4%

Personal Property Taxes/Licenses 0.1%

Collection Exp (collection, credit card fees) 0.3%

Bad Debt Losses 0.3%

All Other Operating Expenses 2.0%

### 6A

- 2 

## Table 6A.2.1 Cont. *

Item Percent of Revenue Scaling

Total Operating Expenses 25.3%

Operating Profit 1.3% Baseline & Incremental

Other Income 0.5%

Interest Expense 0.6%

Other Non

- operating Expenses 0.0%

Profit Before Taxes 1.2%

Source: Heating, Airconditioning & Refrigeration Distributors International. 2010 Profit Report (2009 Data) . 2010. Columbus, OH.

*W holesaler costs and expenses are percentage values as opposed to the per dollar of sales revenue values shown in chapter 6

.



## 6A.3 DETAILED MECHANICAL CONTRACTOR DATA

Chapter 6 presentes mechanical contractor revenues and costs in aggregated form, based

on U.S. Census Bureau data. Table 6A.4.1 shows the complete breakdown of costs and expenses

provided by the U.S. Census Bureau. The column labeled “Scaling” indicates which expenses

were assumed to scal e with only the baseline markup and which were assumed to scale with both

the baseline and incremental markups. As described in chapter 6, only those expenses that scale

with baseline and incremental costs are marked up when there is an incremental change in

equipment costs.

6A.4 ESTIMATION OF WHOLES ALER AND MECHANICAL CONTRACTOR

MARKUP STANDARD DEVIATIONS

The U.S Department of Energy (DOE) used the U.S. Census Bureau’s Economic Census

data to estimate commercial refrigeration equipment wholesaler and mechanical contractor

markup distributions. In the case of wholesalers, 2002 Economic Census data were available

only at the national level – 2007 Economic Census data were not yet available as of midDecember, 2010. In the case of mechanical contractors, the 2007 census data include d state

level plumbing, heating, and air conditioning data for total value of work, number of firms, cost

of goods sold, cost of subcontract work, cost of materials, and construction payroll, as shown

in Table 6A.4.2 . The most recent census was performed in 2007.

Table 6A.4.1 Mechanical Contractor Expenses and Markups Used T o Scale the

Incremental Markups*

Item Dollar Value Percentage Scaling

Total Cost of Equipment Sales $107,144,428 67.80%

Cost of materials, components, and supplies $59,023,964 37.35%

Payroll, construction workers $31,373,558 19.85%

Cost of construction work subcontracted out to others 13,646,192 8.64%

Cost of selected power, fuels, and lubricants $3,100,714 1.96%

Gross Margin $50,895,129 32.20%

Payroll Expenses $27,626,376 17.48%

Fringe benefits, all employees $13,585,040 8.60%

Payroll, other employees $14,041,336 8.89%

Occupancy Expenses

Rental cost for machinery, equipment, and buildings;

Cost of repairs to machinery and equipment;

Purchased communication services $3,436,208 2.17%

### 6A

- 3 

## Table 6 A.4.1 Cont.*

Other Operating Expenses $6,165,776 3.90% Baseline & Incremental

Depreciation charges during year $2,297,550 1.50%

Computers; Insurance and other business services;

Advertising and p romotions; Taxes and l icense f ees $3,868,226 2.40%

Net Profit Before Income Taxes $13,666,769 8.60% Baseline & Incremental

Source: U.S. Census Bureau. 2007 Economic Census, Release Date: 8/14/2009, Sector 23: EC0723I1: Construction: Industry Series:

Preliminary Detailed Statistics for Establishments: 2007

. (Last accessed, March 8, 2011.)

< http://factfinder.census.gov/servlet/IBQTable?_bm=y&

- geo_id=&

- ds_name=EC0723I1&

- _lang=en >

* Mechanical contractor costs and expenses are first presented as total dollar values and th e n converted to percentage values. This is in contrast to

per dollar of sales revenue values shown in chapter 6

.



## DOE used the st ate

- by

- state variation in heating, ventilating, and air conditioning

( HVAC ) contractor markups as a component of state- by

- state variation in the life

- cycle cost

( LCC ) studies. In the case of the contractor markups, the variation in contractor markup by state

is captured explicitly in the subsequent L CC analysis

. By “selecting” a state during the Monte

Carlo analysis, DOE varied the installation costs widely. Looking at contractor markups on a

relative basis, the lowest state is 90 percent of the average markup while the highest state is 119

percent of th e average. Using population as a weighting factor, HVAC was combined with other

factors that vary by state to create one of the key sets of cost components varied during the

analysis

.

Table 6A.4.2 Mechanical Contractor Baseline Markups by State, 200 7*

State Number of

Firms Value of

Construction

($000) Cost of

Subcontract

Work

($000) Cost of

Materials

($000) Construction

Payroll

($000) Baseline

Markup

Alabama 1,425 2,010,305 113,782 876,341 411,100 

### 1.435

Alaska 229 583,171 52,245 171,575 120,909 

### 1.692

Arizona 1,510 3,522,116 179,103 1,508,903 638,469 

### 1.514

Arkansas 1,045 1,065,754 68,417 461,924 213,054 

### 1.434

California 7,272 16,726,969 1,070,065 6,330,469 3,464,667 

### 1.539

Colorado 2,015 3,056,988 261,734 1,195,057 627,663 

### 1.467

Connecticut 1,321 1,704,668 145,740 628,720 361,411 

### 1.501

Delaware 306 481,900 D D 163,343 

### 1.421

District of Columbia 22 34,600 D D 50,439 

### 1.458

Florida 5,069 9,061,426 783,859 3,736,811 1,733,721 

### 1.449

Georgia 2,534 4,700,799 365,010 2,224,110 740,722 

### 1.412

Hawaii 280 800,221 46,753 270,723 137,646 

### 1.758

Idaho 594 900,698 62,252 387,181 167,732 

### 1.459

Illinois 3,848 7,641,642 602,251 2,833,489 1,622,307 

### 1.511

Indiana 1,867 4,002,323 431,558 1,319,523 854,157 

### 1.536

Iowa 1,066 1,868,483 144,869 801,239 359,775 

### 1.431

Kansas 966 1,395,359 106,307 580,764 279,636 

### 1.443

Kentucky 1,219 1,747,925 128,902 674,500 353,958 

### 1.510

Louisiana 1,469 1,997,044 162,063 776,784 378,582 

### 1.516

Maine 458 580,816 46,692 234,993 113,162 

### 1.471

Maryland 2,024 5,329,135 698,381 2,009,957 1,031,222 

### 1.425

Massachusetts 2,520 4,099,301 488,098 1,475,525 817,754 

### 1.474

Michigan 3,051 4,420,638 604,850 1,569,113 841,985 

### 1.466

### 6A

- 4 

## Table 6C.4.2 Cont.*

Minnesota 1,635 3,402,921 386,669 1,230,126 698,535 

### 1.470

Mississippi 655 1,025,452 76,709 449,851 189,011 

### 1.433

Missouri 1,816 3,335,124 345,285 1,319,142 689,171 

### 1.417

Montana 432 483,578 42,988 216,792 85,678 

### 1.400

Nebraska 683 1,004,296 94,170 455,264 205,904 

### 1.330

Nevada 498 2,327,842 121,091 988,605 490,859 

### 1.454

New Hampshire 531 620,761 39,784 D 128,512 

### 1.472

New Jersey 3,551 5,062,336 496,174 1,825,407 1,015,432 

### 1.517

New Mexico 599 891,914 67,987 356,961 170,711 

### 1.497

New York 5,750 10,364,779 1,219,468 3,568,182 1,972,687 

### 1.533

North Carolina 2,978 5,111,396 341,129 2,288,841 1,001,832 

### 1.407

North Dakota 272 360,683 36,037 148,617 70,403 

### 1.414

Ohio 3,514 5,618,591 568,837 2,115,568 1,125,401 

### 1.475

Oklahoma 1,158 1,352,943 94,153 581,079 249,032 

### 1.464

Oregon 1,031 1,893,678 124,070 701,468 412,418 

### 1.530

Pennsylvania 3,653 6,487,476 579,901 2,628,602 1,370,864 

### 1.417

Rhode Island 397 631,202 56,234 229,692 124,727 

### 1.537

South Carolina 1,472 1,991,303 126,123 847,690 352,877 

### 1.501

South Dakota 337 386,186 11,037 158,375 69,605 

### 1.616

Tennessee 1,370 2,595,613 189,293 1,159,952 484,997 

### 1.415

Texas 5,653 10,810,308 823,920 4,605,624 2,102,520 

### 1.435

Utah 892 1,746,398 146,052 769,140 319,812 

### 1.414

Vermont 282 294,806 21,021 D 63,015 

### 1.472

Virginia 2,547 4,623,151 347,055 1,791,740 960,534 

### 1.492

Washington 1,602 4,111,543 370,741 1,546,819 816,533 

### 1.504

West Virginia 416 655,100 D D 90,660 

### 1.464

Wisconsin 1,839 2,926,545 234,962 1,125,779 662,893 

### 1.446

Wyoming 262 289,391 14,391 128,922 54,792 

### 1.461

Average Baseline Markup 1.477

Standard Deviation 0.070

Relative Standard Deviation 0.048

Source: U.S. Census Bureau. 2007 Economic Census, Release Date: 11/24/2009, Sector 23: EC0723A1: Construction: Geographic Area Series:

Detailed Statistics for Establishments: 2007

. (Last accessed May 28, 2010.)

< http://factfinder.census.gov/servlet/IBQTable?_bm=y&

- ds_name=EC0723A1&

- NAICS2007=238220&

- _l ang=en >

* The Census Bureau withheld data for some states due to sample sizes and the size of errors relative to means. For states where a D appears

under the headings for Subcontractor Costs, Materials & Supplies, or Construction Payroll, data was withheld . States missing one or more

variables were set equal to an average of neighboring states' baseline markup.